The Rise of the Privatized Military Industry
By Peter Singer
Cornell University Press (2003)
It’s a rare day when you’ll find me giving props to anyone from the milquetoast Brookings Institute, but Peter Singer’s Corporate Warriors is both timely and comprehensive.
The growth of the global PMC industry has exploded in the past decade, when the U.S., government alone awarded over 3,000 contracts to private military firms. The 1,000 or so companies that define the corporate military industry currently rake in a total $100 billion per year for active operations in over 50 countries around the world, and the industry is expected to double in size to $200 billion by 2010.
“Accordingly, staggering economic gains have been made in investments in the PMF industry,” Singer reports. “In the 1990s, publicly traded companies in the field grew at roughly twice the rate of the Dow Jones industrial average.” The industry was protected from the ravages of the high-tech market crash by the response to the terrorist attacks of September 11. The value of mil-corp stocks like L-3 (which owns MPRI), for instance, have doubled since 9/11.
“The war on terrorism is the full employment act for these guys,” one Pentagon official commented. “A lot of people have said, ‘Ding, ding, ding, gravy train.’”
Yet the industry’s phenomenal growth started long before 9/11, and is attributable to a number of factors:
First, the military, like many businesses, has outsourced and downsized its permanent labor force in recent years, at a time when there has been an expansion of interventions and other contingency operations. Many argue that the U.S. military is overextended and under resourced. The high political costs make a draft virtually unthinkable (at least before the next election), so the Pentagon has increasingly used military support firms (who also conveniently provide lucrative jobs for ex-military personnel.)
A second factor has been a so-called RMA – Revolution in Military Affairs. Rather than developing and spreading technologies out in the broader market, the military is more often adopting technologies and business strategies developed by the private sector. Private contractors often develop new ways to meet new military requirements more rapidly than the military can meet them itself.
Third is the spread of the dubious doctrine that privatization results in economic efficiency. Privatization has been the mantra for a variety of government services (garbage, prisons, schools, social security), supported by Democrats and Republicans alike, with continuous pressure from the industries that stand to benefit.
Finally, of course, there's the lobbying these firms do in Washington to keep government contracts headed their way. In 2001, 10 private military companies spent more than $32 million on lobbying. DynCorp retained two lobbying firms that year to successfully block a bill that would have forced federal agencies to justify private contracts on cost-saving grounds. MPRI's parent company, L-3 Communications, had more than a dozen lobbyists working on its behalf, including Linda Daschle, wife of Senate Minority Leader Tom Daschle. in 2002, L-3 won $1.7 billion in DoD contracts.
During the first Bush Presidency, Dick Cheney gave Halliburton subsidiary KBR a contract to evaluate the privatization of certain military services. The company conveniently concluded that privatization would save money, and lo and behold, KBR somehow got the first contract -- the same contract (known as the LOGCAP) that was expanded to give the company a leading role in the reconstruction of Iraq. (Cheney must have learned a lot from his DOD experience. Recall that not only did he go to work for Halliburton after his stint at the Pentagon, but he headed the 2000 Bush campaign’s search for a running mate, in the end recommending himself as the best man for the job.)
A lack of basic accountability, and reports of cost over-runs (the GAO found that Halliburton charged the government some $86 per sheet of plywood during operations in Kosovo) suggest that claims for efficiency are unsubstantiated at best. If you want to run a government “like a business” (as our MBA president once claimed), then you probably don’t want to run it like Enron, with Anderson-like accounting. The efficiencies of privatization rest on the theory of a competitive market – which doesn’t apply to most military contracts. In addition, the design of the “cost-plus” contracts is inherently wasteful, delivering profits as a percentage of overall costs, thus creating incentives to jack up the cost).
There are three types of PMCs. The Provider firms, the Consultants, and the Support firms.
• PMCs most closely fit the stereotypical role of mercenaries. They provide technical combat services at the forefront of the battlespace, by engaging in actual fighting, either as line units or specialists (e.g., as combat pilots) and/or commanding and controlling field units. These “tip of the spear” operators, like Sandline, Executive Outcomes and Global Risk (which has 1,100 armed personnel in Iraq, including 100 from the Balkans, 500 from Fiji and 500 Nepalese Gurkas), have run combat operations in Angola, Sierra Leone, Papua New Guinea, Indonesia and elsewhere. “Although these firms deploy units that are often much smaller in manpower relative to their client’s adversaries, their effectiveness lies not in their size, but in their comprehensive training, experience, and overall skill at battlefield judgment, all in fundamentally short supply in the chaotic battlefields of the last decade.” More commonly, they serve as specialized “force multipliers” who act as “mini-generals” providing the expertise that is often lacking.
• Military Consulting Firms don’t operate in the battlefield, but provide consulting and training services integral to the operation and restructuring of the client’s armed forces. Examples include MPRI, Levdan and Vinnell – the PMC that was once owned by the Carlyle Group (See 11/15 entry below), and which lost at least nine employees in the bombing of its compound in Saudi Arabia in May.
• Support firms are skilled in supply chain management. This includes companies like Halliburton’s KBR, which maintain military bases, doing everything from laundry and food services to staging operations and equipment maintenance. In high-tech wars like the Gulf Wars, the maintenance of high-tech equipment is crucial.
As Singer suggested recently in a briefing on PMCs on the Hill, the corporate military industry is “totally unregulated.” Congressional notification doesn’t apply until a contract is worth $50 million or more (a requirement easily evaded by the chartering of extraterritorial subsidiaries or by breaking the contracts up into smaller increments). Often the only bureaucratic requirement is a simple export license from the State Department’s Office of Defense Transitions Assistance, which is usually easy to obtain and comes through a process protected from scrutiny. (State Department officials cannot provide information on PMF contracts due to the claimed need to protect proprietary information.)
Over twenty Private Military Corporations (PMCs) are currently operating in Iraq, training Iraq’s new police force (Dyncorp), protecting the oil pipelines from sabotage, and providing basic logistical support to the troops. We don’t know what most of these firms are actually doing or who hired them, in large part because most PMC contracts are even more obscure than the no-bid contracts that Henry Waxman has been doggedly objecting to.
We know even less about PMC activities elsewhere. Now and then there are news reports about “contract workers” killed in the southeastern mountains of Afghanistan, or about three unidentified contractors captured by the FARC in Columbia after their plane was shot down, but most stories are left untold.
Thus, the use of PMCs allows government agencies (particularly in the executive branch) to potentially skirt specific restrictions on the use of force, such as the Leahy Amendment.
There is also little evidence that the potential strategic consequences of privatizing critical military services on the battlefield are being addressed. For example, the points of interface between public forces and contracted forces can be places of “particular vulnerability that an adversary might exploit in the physical or electronic realm.” There have been reports of U.S. troops left in the lurch during the Iraq war when private contractors suddenly “changed their mind” and left, breaking a critical link in the supply chain. Contract personnel also cannot be shifted quickly to combat roles, so that there is no military buffer or insurance if the force requirements suddenly rise or there is a rapid change of conditions on the ground. Contractors can therefore be “rigid tools for a fluid environment,” according to Deborah Avant, author of “The Market of Force.” There have already been allegations of conflicts between active duty personnel and contractors over who is training forces on the ground.
The rights of contractors as potential prisoners of war is also unclear (a potential concern in places like Columbia, where the FARC is holding three Dyncorp employees hostage): contractors do not operate under a Code of Military Justice.
Meanwhile, there are few to no standards within the industry itself regarding who they hire (when firms are struggling to get people into the field, there is little incentive to screen personnel for their potential history of human rights violations – which has important implications for jobs such as the training of ex-Baathists to serve in the new Iraqi police force).
PMCs can suffer from a bad reputation, but that hasn’t stopped many of them from working for drug cartels, guerrilla groups and even groups linked to al-Qaeda (two firms -- Sakina and Transglobal -- have reportedly run jehadi training courses). It’s unlikely that the conservation groups that hired them to protect the White Rhino in Africa were able to conduct due diligence on a PMC firm that could in turn use this contract as a resume builder to provide legitimate cover for shadier operations.
There is also an obvious absence of any control over subcontracting and some PMCs are often incorporated offshore (in places like the Channel Islands) where their finances and ties are difficult to track. The UN has a special commissioner for mercenaries, but they are overwhelmed and essentially incapable of dealing with PMCs as a regulatory issue.
Nor does the U.S. set any contractor responsibility standards, as should be obvious considering that Dyncorp was awarded the same kind of contract in Iraq that they were awarded in the Balkans, where company employees were allegedly involved in sex trafficking. (When it came to light, Dyncorp fired the whistleblowers, not the personnel who allegedly committed the crime.)
There are also other potentially unforeseen consequences. According to Max Weber, one of the essential characteristics of a state is that it “successfully upholds a claim to the monopoly of the legitimate use of physical force in enforcement of its order,” the ultimate measure of sovereignty being the control over the means of internal and external violence. It has been assumed for some time that the exercise of power in the form of sheer military force has been largely the exclusive prerogative of governments. But that assumption may soon break down, complicating questions of sovereignty, so that “where state structures are weak, the result is a direct challenge to the local basis of sovereign authority, its ability to overwhelm all other challengers when it comes to violent force.”
It is not out of the range of possibility that we are entering an age, similar the early medieval period, “when highly expert military tasks … were often handled by hired specialists, rather than by regular soldiers.” With organized military resources available on the open market, power is more fungible than ever.
In the late 1990s PMCs tipped the balance in a number of wars. After experiencing early defeats in its war with neighboring Eritrea, Ethiopia hired Russian military experts to run its air defense, artillery, radar and electronic warfare. The firm Sukhoi sold Ethiopia a wing of Russian Su-27 fighter jets (equivalent to the U.S. F-15), including in the contract the services of over 250 pilots, mechanics, and ground personnel, who would fly and maintain the planes. In essence, Ethiopia was leasing its own small, but complete air force. The country also hired its own set of private Russian ex-generals, who played a strategic planning role. Ultimately, this revamped force crushed the Eritrean army quickly.
The potential for scenarios that are the stuff of science fiction is not unimaginable.
There could be a foreseeable circumstance where corporations hire the PMCs, or corporate conglomerates have their own PMC subsidiaries that pursue the company’s interests, apart from any nation-state.
“The one aspect that formerly limited the power of multinational corporations was their physical weakness, which kept them dependent on the local state and only able to operate in zones of relative stability. This security was provided by the state, meaning that their operations and even survival as a viable business were conditional on the local state carrying out its responsibilities. Today, this limit no longer necessarily holds true. PMFs possess a capacity for armed force that rivals and even surpasses local state functions. They can transfer this to their multinational corporate clients. Thus, multinational corporations and their allied private military firms now have the capability to engage in what they term “security-led investment,” in which the physical weakness of the local state is irrelevant to their business operations.”
The emergence of this new form of transnational firm is an obvious example where the expansion of global markets – globalization – has done anything but diminish the incentives for violent conflict (Thomas Friedman’s ludicrous theory, spelled out in the Lexus and the Olive Tree). “PMFs are a different type of company that, instead, relies on the very existence of conflict for profit.”(174).
PMCs could thus act as leaders in a newly evolving stage of corporate dominance, or as the UN special rapporteur put it, “the multinational neocolonialism of the twenty first century.” If Osama bin Laden and al Qaeda can take advantage of the weaknesses of Afghanistan’s government to build a base of operations accountable to no one, there is little that one can imagine can stop corporations from similarly colonizing their hosts. With extreme polarizations of wealth, it’s easy to imagine giant gated cities which protect rich outsiders from the demands of poorer locals (not unlike Vinnell’s compound in Riyadh).
“Conceptions of the international security environment exclusively based on the sole power of states miss out on some of the important changes that the privatized military industry portends,” Singer warns. “The result is that states in the current global system may be like dinosaurs toward the end of the Cretaceous period: powerful but cumbersome, certainly not superceded, but no longer the unchallenged masters of their environment.”
PMFs reject this thesis of a new type of corporate imperialism, says Singer, noting that they have generally been invited in by legitimate governments. But of course 19th century imperialism also often began when a weak ruler requested the original intervention.
It is also easy to envisage situations similar to the warfare that occurred between the various mercantile companies in the 1600s and 1700s, Corporate forces might again enter battle against each other (there are already many well-known examples of large-scale corporate espionage which likely represent only the tip of the iceberg).
“In fact,” Singer adds, “this scenario may already have occurred. Executive Outcomes is rumored to have engaged forces of Omega Support Ltd. in Angola. Violence among firms has also been reported in the DRC and Sierra Leone, often over competing mining claims.” (189) “An added danger of greater private power is the risk that empowered corporate actors themselves will become competitive not only with weak local states, but also to the national interests of other powers, including even their own home states.” (Imagine a plot similar to the movie “Seven Days in May,” where PMC officers, originally invited to serve in top Pentagon advisory roles, effectively take over the military leadership, and in turn unilaterally force the country into war. You might object that we've already sen that w/Richard Perle and neocon cabal.) “Examples of American-based arms manufacturers and technology firms that sold their goods to foreign enemies of the United States abound; nothing would seem to make PMFs, who have even less oversight on their services, any different.
We have already learned from Iran-Contra and BCCI that the locus of judgment on whether, when and how military operations are carried out can easily slip outside state control. In such circumstances, the state’s agent of action is no longer its national military, but instead a network of actors with little accountability or allegiance to any nation, respect for its laws or its citizens. Throw in unbridled profit motive and you have the potential for significant and unforeseen consequences.